Stocks A,B,and C Have Identical Risks

question 63

Multiple Choice

Stocks A,B,and C have identical risks.Stock A earns an annual return of 9.9 percent as compared to 9.6 percent returns on stocks B and C.Given this,you can correctly assume that:

• A) Stock A is overpriced.
• B) the market return is 9.75 percent.
• C) Stock A represents the smallest-sized firm.
• D) Stock A has a positive excess return.
• E) Stocks B and C represent firms that are in the process of merging.

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Definitions:

Long-term Memory

The phase of memory responsible for the storage of information over extended periods, potentially as long as a lifetime.

Disequilibrium Principle

The state of imbalance or disequilibrium in an eco-system or in a market, which can lead to significant shifts or adjustments within that system.

Classical Conditioning

A learning process that involves creating associations between a naturally occurring stimulus and a previously neutral stimulus.

Law of Effect

A psychological principle suggesting that behaviors followed by positive outcomes are likely to be repeated, while those with negative outcomes are not.